WHEN: Today, Tuesday, December 5, 2023
WHERE: CNBC’s “Squawk on the Street”
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Perella Weinberg Partners CEO Andrew Bednar and CNBC’s Leslie Picker on “Squawk on the Street” (M-F, 9AM-12PM ET) today, Tuesday, December 5. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2023/12/05/deal-making-waiting-game-appears-over-says-perella-weinberg-ceo-andrew-bednar.html.
All references must be sourced to CNBC.
LESLIE PICKER: Hey David, thank you so much. Yes, I am here with Andrew Bednar of Perella Weinberg, the CEO there. Thank you so much for joining us.
ANDREW BEDNAR: Thank you.
PICKER: You focus, obviously, on M&A, global M&A total $2.4 trillion in the first 10 months of the year, down about 20 percent from a year ago to the lowest amount since 2013. At what point do executives just stop waiting for the perfect environment and start doing some of these deals that we say there’s all this pent-up demand to do deals out there? At what point do they start actually doing them?
BEDNAR: I think we’ve already crossed that point. We saw in the second quarter a real inflection in the dialogue, and I think there’s a real divergence between the data and the dialogue. So, the data’s very clear. The M&A markets are down this year, and I think with 26 days left in the year, I think that statement will still be true at the end of the year. But the dialogue really changed in our markets back in the second quarter. That’s been a steady progression. I think that, at that point, executives and boards really declared the waiting game is over in M&A, and we’ve seen a very nice progression up in dialogue, and we think that’s a very good leading indicator for future announced M&A activity, which we do expect in ’24.
PICKER: In terms of some of the key hindrances, interest rates, geopolitical uncertainty, do executives need those to attenuate in order to really kind of officially consummate these deals or at this point, are they just saying, you know what, things are going to stay uncertain, we don’t know what’s going to happen with rates, we don’t know what’s going to happen abroad. We need to just to do this now.
BEDNAR: I think executives and boards have largely accepted that we’re in a market of uncertainty, it almost goes without saying. So, it’s a quite overused term, I think it’s the natural state of the world that there is uncertainty. I think what executives and boards have done is they’ve adjusted to uncertainty. They’ve been looking at the range of uncertainties and moving in the face of those uncertainties rather than waiting. And I think waiting, at some point, does become a decision. And that decision is proving to be more costly as people wait for better conditions. And instead of waiting, they’re moving ahead in the face of those risks that you mentioned. And there’s always going to be headwinds around the transaction markets, whether it be around M&A or financing or around the liability management restructuring markets, but you have to move in the face of headwinds always. I think executives are charged with growing their companies and building value, and they’ll continue to manage through uncertainty. I’m convinced without hesitation.
PICKER: What about the regulatory uncertainty, though? Because I sat down last week with Jonathan Cantor’s deputy, Doha Mekki, at DOJ, and she talked about the administration’s bias toward action, even if that means occasionally losing in court. That was a direct quote. So, what effect is that having in the boardroom in terms of deterrence?
BEDNAR: So, the regulatory bark has been quite loud, and it’s meaningful, and it has, I think, affected behavior for sure. But the bite has been quite manageable and I think quite minimal. So, if you look at the number of transactions that have gone ahead and that have announced and closed, it is significantly higher than transactions that have been challenged by regulators and even significantly more that have closed versus those that had been blocked by regulators. So, the posture that’s been taken by regulators is very real and it is affecting boardroom decisions. Some of the decisions will never even see the light of day, so we’re not able to observe and measure the transactions that aren’t coming to market. But those that do come to market, I think, again, the bite is very manageable. I think it’s taking more time. I think that transaction participants need to be more thoughtful and careful about how they present their case to regulators. But overall, I think that’s time and money and more thought, it’s not completely killing the M&A markets. The idea that M&A would die at the hands of regulators is just not true. We don’t see any evidence of that. We just see a different regulatory posture. And again, I think that our clients are managing through that quite well.
PICKER: Speaking of a regulatory posture, private credit has definitely come into the forefront of just the public consciousness this year. In particular, it’s been around for a while, but in terms of people talking about it, it’s a huge growth area. So far, very minimal regulation in this world. Do you see that changing anytime soon? I know it’s frequently used to finance a lot of buyout activity, which you’re advising on. So, I’m curious kind of your perspective on just the private credit market and its potential for regulation.
BEDNAR: Yes. We’re very active in the private credit market. We have a debt advisory team and a business where we help our corporate clients and our private equity clients and family offices access credit markets, and private credit is a very important avenue and pathway for those clients. And so, we’re very happy with the advent and significant development of the private credit markets. It really is a stunning development in the financing markets. And so, when you look back at this business, as you correctly point out, it’s really been around for a long time. The idea of direct lending has been in the marketplace literally for decades, and it probably took it took a few decades to actually get to 500 plus billion of AUM, and then it took less than five years to get to a trillion of AUM, and then less than three years to get to a trillion and a half of AUM, and I think you’ll probably be a $2 trillion private credit market here as you head into the next year or so. And so, it really offers choice to our issuer clients, and it gives issuers an opportunity to evaluate different pathways for accessing credit. It is a regulated business, so these credit funds are regulated through the SEC, they are registered investment advisers. So, the idea that they’re not regulated is not the case. The idea that they’re non-banks is also a very important point because they’re not regulated by banking regulators. And so, they’re specifically not banking institutions. And, you know, when you make your money from CNBC for your excellent reporting, and then you deposit your money in a bank, there are certain safeguards that come with that, there’s FDIC insurance, there’s things like Tier 1 capital, that all sounds safe and secure, but in the end, when you’re a depositor in a bank, you really have no idea where they’re putting your money. You have some concept that they’re investing it to earn revenue and produce earnings, but really depositors have no idea where that money’s going.
PICKER: Right.
BEDNAR: In the world of direct lending and private credit, these sophisticated investors know exactly where they want those assets to go. They know it’s going into credit. And so, the idea of regulating that is going to be, I think, a bit of a policy challenge, because I personally don’t see what the policy objective would be, and I think it’s a pretty tricky area for the regulatory world.
PICKER: Yes. Andrew Bednar, thank you so much for joining us today. CEO of Perella Weinberg, really appreciate it.
BEDNAR: Thank you.
PICKER: Sara, I’ll send it back to you.
